frenzythe volatility continues with global stopped set for their worst month in more than three years. that comes as federal reserve officials refused to rule out raising interest rates next month. september is still on the table. and pressure on two fronts -- protests over military policy and japan's industrial production unexpectedly slumps. welcome to "the pulse." i'm in london. it has been another day of
trauma in the asian equity markets. china's stocks extended their biggest two-month tumble since 2008, amid growing concern that government intervention to prop up the market will fail. slipped afteran industrial production unexpectedly fell in july. we have all the bases covered and will have the latest from hong kong and tokyo in just a moment. first, let's bring in mark barton. mark, these markets show no sign of reprieve. mark: the worst month since may, 2012. markets --nd develop the developing market is the worst since may, 2012. you get the just. gist.ee world index is --
china is the epicenter of worry as investors are considering whether intervention will work. china is lumping 12.5% after slumping 40% in july. what into the next, manus, happened at jackson hole -- probably the most important speech was that made by the feist german stanley fischer -- by the vice chairman stanley fischer. he proclaimed his faith that inflation is poised to move upward, and his remarks weren't signaling an impending rate tight in september, but don't take off the table a rate hike. have a look at how european stocks have fared over the month of august. even worse than global stocks. thein close -- this is stoxx 600 -- the biggest monthly drop since 2011, an 8% decline. 12% below the record in april. it was at a record, remember
that. every group. has dropped this month here -- every group has dropped this month. basic resources have lost 25 billion, oil and gas have lost almost 60 billion, and don't forget european stocks actually rose last week for the first week in three, gaining by point .55%. i want to focus on crude quickly -- it is down for a third consecutive month, despite last week rising for the first week in seven. facts,some shocking thank you very much. let's turn our attention to china. the biggest selloff since 2008. the investors are worried about the level of state support. joinsgo out to hong kong u.
they are literally throwing support at the economy and the market -- what is the latest? there seems to be a sense of nobody knowing where they are throwing their energies. >> good morning, manus. exactly. it is another day of conflicting signals from china. we know that last week, the internal debate among the chinese officials was not to intervene -- they felt the cost was too high. there was a disconnect between the stock market and the , then there was the potential bank that came in and cut rates across the board. and toward the end of last week, the government came back in to shore up stocks ahead of the big military parade in beijing. we start the week again with another selloff. conflicting push-pull signals coming out of beijing. the extent to which they want to shore up stock prices, because we also know the view that they don't feel like they should be intervening.
is a confusing picture at the moment. manus: thank you very much. are chief asia economics correspondent. that brings us to our twitter question. have the markets lost faith in china's policy responses? depends how you view the policy responses thus far. china saved the equity market, or should they be focused on housing? one constitutes 25% of gdp. staying with asia, economists have been anticipating again. -- a gain. instead, what we got was a drop. we are in tokyo with a little more. what does it say about the economy in terms of shaping up for the third quarter? not a good currency razor, is it? aaron: oh, no, certainly not. it is looking increasingly like the economy limped into the third quarter. it contracted last quarter.
the central bank governor was saying that he didn't ask acted to continue. it looks like it is. companies here are projecting a slight increase, and companies have been too optimistic recently. economists are saying that they aren't going to meet their optimistic projections. with loadsompanies of inventory they will have to work off, and china is slowing. this is going to put a lot of pressure on japanese manufacturers. it will be a challenging quarter for them. manus: and in terms of the bank of japan, this is where the great debate will come -- do they need to do more? will this debate be reignited? how comfortable are they with a set of data? the government side, we arty have predictably some people saying that the government needs to add a fiscal stimulus.
that is percolating and we will see how that plays out. as i mentioned, the central bank governor, governor kuroda, said he didn't expect the weakness in industrial production and exports to continue. it looks like it is not exactly that strong. we will have to see what his pain threshold is. last week in new york to give a speech, and he was quite optimistic about various drivers of inflation. the central banks may engage -- main gauge. other times he pointed to other sides showing that inflation is higher. he is counting on higher wages and whatnot to kick in, and drive inflation higher over the course of this year. now, as today's data showed, the upbeat scenario may not be playing out. arran, the upbeat scenario is under pressure. that is a full roundup from all
of our reporters. some of the low-inflation was market volatility. sluggish global growth won't deter the federal reserve. that is the take away from the central bank of annual jackson hole retreat. bloomberg sat down with several fed officials who were used to rule out a move in september. >> the key question for the committee is how much would you want to change the outlook based on the volatility we have seen over the last 10 days. i think the answer is going to be not very much. >> we should be telling a coherent story, not about what happened in the last 10 days on wall street. we are about trying to shape inflation and employment in the year to two years. >> i think we should expect some volatility. what it means for monetary policy i think is not yet clear. it is a complication, something we watch, but i am not ready to say it has a particular long-term effect.
>> i think the fomc has signaled that every meeting is going to be a live option. i think in between meetings, we are always judging what has occurred that would change our forecast. at this point for me i have not in some that would change my own sense of how the economy is doing. data,m looking at all the evaluating what is going on in the volatility of financial markets. we will be putting in new forecasts for fomc participants at the september meeting. in looking atfar all the factors is that the economy can sustain an increase in interest rates. >> with the distance we have traveled as well as the current outlook for the economy, both of those to me, i think, would suggest that we are close. the timing is close. head: let's bring in the of gtn effects.
they all got a memo, didn't they? which was volatility -- we don't look at 10 day market moves. it is a complication but not something that was way to. mr. fischer saying that we could remove accommodation of the gradual pace. they are still leaving september on the table. >> very much. the big question ahead of the gathering was to what extent the china induced market selloff will indeed change the collective minds on september. are now off the table, and most of the fed officials indicated that it is still very much live. a lot will depend on the payrolls that we see on friday. that will affect their september,king in when they gathered to decide.
wiorp, a function on the bloomberg terminal -- are you going for a september hike? what kind of number in payrolls that they need to see to assuage them of holding back? valentin: the probability did swing quite a bit. it was around 40% going into china's selloff, and it dropped a bit. the market is less than 50% -50% that a rate hike will come in september. we changed our call recently. we were expecting september to be a viable option, potentially october or december. but having said that, it is up to the fed. also interesting to see the conflicting situation, the conflicting motives. they don't want to derail the
cautious recovery in the u.s. economy. at the same time, they don't want to be delaying the rate too much, in particular the fact that they do see the economy is not enjoying a strong recovery. however, they do want to move away from the zero. the recent comments to suggest that the september hike could still be on the table in terms of what payrolls we will need to get anything above 200k, which could encourage investors to bring back the september rate hike. manus: which brings me, then, to your domain. volatility in the dollar over the past 11 days. ar trace on the dollar -- little bit of resurgence in the past couple days -- is the market long dollars? do you want to belong dollars? valentin: long dollar is still the strongest conviction. it has been the case that investors were adding to them
for the last 18 months or so. that is the biggest position out there in the market. seeinghing, what we are is that investors could be encouraged if we see a hike in september. that would come as a surprise. that said, if anything, history would suggest that the dollar tends to be outperforming in the immediate run-up to the rate hike in shortly after, but then tends to lose ground. that confidence that the dollar can make another 10% is no longer there, so there is some consciousness as well. there -- things could -- outlook could improve further. that said, we think that, if anything, the how performers will be the greatest, safe haven currencies -- like in the euro and the yen. any potential of outperformance could be eliminated by the
resurgence in the risk aversion. manus: i want to turn your attention to china. china says there is no basis for further depreciation and the yuan, that it remains a stable and at a good level. can you trust them? valentin: not really. it is one thing what the officials want and what they would get, especially if they want to encourage a more market-driven currency. if anything, they took a step back from really influencing the path of their currency, so they have to live with the markets, where the market ars are going. what they are facing are fairly uncertain near-term outlooks. repeated failures by the officials to contain the stock market. so long as that is the case, the uncertainty will likely linger. still to the extent that we are seeing the combined effects of
portfolio outflows out of china, plus repayment of fx liabilities by chinese corporations. all of that will continue to weigh on the yuan. our expectation is that it will stabilize against the dollar over the medium-term, but the path toward that medium-term target -- it will overshoot or undershoot the target. the point being that the risks are still on the down. manus: well, they have a heck of an economy to contain. through atay with me few more topics on the bank holiday monday. here is a look at what it looks like. angela merkel is calling on the european union to take greater share of the interest of its parliamentary. germany, france, and the u.k. have asked for an emergency meeting on how to address the crisis. germany alone expects 800,000
refugees to enter the country this year. the italian energy company says it has discovered that it discovered a supergiant gas field off egypt's coast. it is the largest find in the mediterranean sea and may hold as much as 30 trillion cubic feet of gas, the equivalent of 5.5 billion barrels of oil. it is the sole operator in the region. the latest prime minister is stanley firm, after two days of protests in kuala lumpur. there are allegations of corruption and mismanagement. the prime minister said he won't let agitators destroy the country. up to aoomberg, filling pretty busy week. here is what they should be watching. rateay, the estoril you decision comes in -- what happens next to the aussie dollar. thursday, the ecb rate decision
day. friday, the report that every market has been focused on -- it day, the last one before the september federal reserve meeting. friday, the g-20 meets in turkey. jack lew and the german finance minister are both due to attend. but before all of that, we will get the eurozone inflation data at 10:00 a.m. today. stay tuned for that. at 1:00 p.m., gdp numbers from india. and we will have a conversation about india, talking more about it after the break. the central bank governor warns that some assets are still mispriced and there may be more volatility to come. stay with us. ♪
manus: welcome back. we are streaming on bloomberg.com, on your tablet in your phone. bond funds and india are battling slower inflation. will that allow the r.b.i. to cut interest rates again? with some expecting a move to come as early as next month, the benchmark has been lowered by 75 basis points this year, boosting sentiment in longer and bonds.
speaking to bloomberg at the jackson hole convention, the royal bank of india governor rajan -- well, is he done? let's take a listen. >> i would say we are in a period of on trustful growth. it would be better if we gre fasterw. i would say central banks have done what they can do. it is an idea universally held, but when i think in general across the world, central banks are done, pretty much what they are capable of. no others have to step up. manus: let's bring back in valentin, the head of g 10 fx reserves. we just heard governor rajan say that central banks have done everything. it's over to governments now. what do you make of that? valentin: that is a view that
has been expressed for a while, that monetary stimulus alone cannot support the recovery. we do need fiscal stimulus of sorts. he was highlighting his idea of secular stagnation, whereby monetary stimulus can only generate price bubbles. we do need a boost to global demand that you come from central government. and away, i would argue that in the case of+++
dealing about the impaired lending, we are dealing with local government levels. i think the voices calling for a centralized government stimulus. domestic demand is becoming more and more likely. obviously, until we get the market could remain vulnerable, but fiscal stimulus maybe the answer. manus: when we listen to governor rajan talking about volatility, expect more volatility, and you are mentioning to me that fx reserves can play into that. fx reserves are in a better position than the 1990's. talk to me about the efforts and why you think they have a consequence on volatility and more volatility to come. valentin: the fx reserve, the t, are used to contain fx volatility. the latest case in point was china, were after repeated intervention to contain a selloff in the u.s., the chinese authorities had to choose their fx reserve. that is not the end of the story -- it is also the case that corporations in china, and also outside other emerging markets, have issues to the tune of $1 trillion over the last four years. and thet is coming due, costs are likely to grow further as the fed is moving closer and closer to moving stimulus. that means the authorities will have to use more of their fx reserves.
the problem is that all these fx reserves were invested in assets like treasury, in stocks. those assets will come under pressure at the central banks. manus: where are we in that process? we saw some of the numbers on china's fx reserve being dissipated, but when you deal with china you deal in hundreds. hundreds of billions. where are we in that cycle of fx reserves divestment process? valentin: i think we are very early. i have an bind the outlook, and for the time being it is moving closer and closer to removing stimulus. at the same time, however, we boost global economic growth that may not materialize. the u.s. is such a close economy. the rest of the world may continue to struggle, meaning that the downside pressure on commodity price and currency is here to stay.
the depletion of fx to reserves could become a reality over the next quarter. we need to seet w an adjustment in measures of structural demand. also, risk premium in the equity market. those measures are still close to bank record lows, right? and these are still to adjust to reflect -- manusthere is a demand coming fm sovereign investors. manus: david ingles was talking about a bumpy ride -- valentin: that is what rajan is saying -- that -- manus: and that is the -- i wish we had more time this morning, thank you very much for giving us your thoughts. valentin marriner. the italian energy firm has discovered what they call a supergiant gas field off the egyptian coast, which it says is
the largest ever in the region. let's talk to anthony, joining us. toda good day to you. this is a pretty significant find. the geography is also quite interesting. anthony: hi, manus. they are saying this is the largest find in the mediterranean in terms of natural gas. they say it is going to be a positive for them in that it will help cash flow, it will help them improve their dividends going forward. they are saying that a developmental below cost, because it is located near fields that they are already developing. a have infrastructure located close by, so that means that the work they are going to do is mainly drilling. they want to stop the first wells -- to start the first wells next year, that is what the ceo just told us. they would like to get the production online as soon as
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economists were expecting an expansion or rise of 0.1%. difficulty is having recovering from a contraction. the german chancellor is calling on european union counterparts to take asylum-seekers. the have asked for an emergency meeting to figure out how to rectify this. after four years of disputes, arbitrators have upheld suzukis risk -- request to terminate a agreement with volkswagen. selling 19.9% in the japanese operation. tell me this, why did relations
right down between the two companies? it seems like such a mutually beneficial agreement. the idea was that suzuki would get access to technology and they would have shared access technology. wideragen would get a hand in the indian market and they would cooperate on small, fuel-efficient cars for merging markets. they came to the agreement in 2009. in 2011, relations soured after suzuki agreed to buy diesel engines from fiat. trust broke down at. both sides accuse the other of reaching the agreement. later, volkswagen will sell its 19.9% take in suzuki, valued at three point oh you dollars. it's been a short marriage.
could they come to an agreement again? this is what the suzuki chairman had to say about it. i am satisfied with the outcome of the arbitration process. we are moving a bone that was stuck in my throat. i feel refreshed. i don't think you would remarry someone you have divorced. guest: that's an acrimonious split. even in ending the agreement, they have still been at odds with each other during suzuki wants to shares sold back to it or to a party of its choosing. volkswagen says the buyer is not yet decided. in the past, fiat has expressed an interest in talking with suzuki. they have not made a comment yet. on top of this, we have further complications. suzuki may have to pay damages.
overall, what looked like a very promising agreement is ended quite bitterly. manus: thank you for putting that in context for us. a 55 billion dollar media company you have never heard of hearing it comes from a single chinese investment. it is africa's largest companies. it is a competitor to netflix. we talked to the ceo. he said that the plans for africa is not a concern for moment. >> there has been a lot of volatility. there have been a lot of important considerations here. the volatility has occurred in the stock market. at the size of the stock market in china versus the
overall economy, it's relatively small. it's 1/7 of how large stock market is in the united states. the volatility in the stock market is probably substantially overblown. what is happening in china is a transition from a much more investment led growth to a more consumer led growth. it is abelieve is consumer business. it is a completely consumer business. over time, fluctuations set aside will benefit from a more consumer led growth model. we should not forget that china used to grow at 10% and growing at 7%. that might come down. that is still one of the fastest-growing markets in the world.
we are pleased with our exports to china. it is the largest internet market in the world are in --. with aninvested in it exceptionally strong team. , we aresure to china excited about it rather than worried about it. there is volatility in the chinese stock market. it will affect our share price. we believe that it's very solid. we don't spend our time worrying about short-term. that is one of the strengths of the company. we look a few years out to i look a few years out at the potential and i'm very comfortable with what we're doing. we have an excellent exposure. if you look at global internet, the size of china and its growth, the investment we have is appropriate. i think what it would take to in thattep change
holding would require a tremendous amount of capital. we are comfortable with where we are. again, we take a long-term view. it's going to be something that is going to be very good for our investors. manus: bring in some breaking news. rocked the scandal that the market earlier. shiva applies for a delay. would be released september 7. you may recall this was a very public resignation of three executives. to the world.cast i think we've got those pictures for you. there is some flash photography during this piece of video. as you can see, it was an incredibly seminal moment in terms of corporate governance.
manus: welcome back to "the pulse." we're live from bloomberg european headquarters. managers are loading up on long-term debt. cutcentral bank may interest rates again. >> i would say we are in a. i would also say that central banks have pretty much done with they could do. position that's held universally by central bankers. central banks have done pretty much what they are capable of. now others have to step up. whether it is through structural reforms, in some cases fiscal policies.
those might be the sources of fragility we have tried it doing too much. as a result in some asset markets, prices are not correct. they may correct. whether that happens smoothly or it happens anymore volatile fashion, i think that is anybody's guess. >> do you believe the stagnation argument? >> we are growing far more slowly than in previous recoveries. is this because of debt overhang? i don't think so. it's something else is going on. i don't know if this is more long-term factors. given all the innovation that is happening, you would hope that we would find some way of monetizing all of the good stuff that is happening. add that to gdp and find that we are growing strongly. manus:
if you're just waking up in the united states. this is "the pulse." rises by 2/10on of 1%. the estimate out there was for a rise of 1/10 of 1%. bit, desperate times if you are referring to this as good news for mario draghi. the yearly rate is to 1%. the consumer price index comes in at 1%. it's been another day of drama on the asian equity markets. china stock has its biggest two-month humble. meanwhile, industrial production fell in july. we have the latest from hong kong in just a moment. first, let's bring in mark barton. let's focus.
we have not started all this well on this bank holiday monday. is a long way to go before the ecb hits its target area this is just below 2%. expectations are coming down. this is something that mario draghi needs to consider. the inflation was the topic at jackson hole, wyoming this week in. policy makers may not have the best record of forecasting inflation. the fed vice chairman is confident that they will reach their inflation target in two years. that keeps september and the table. there is a lot to consider as we approach the u.s. jobs number on friday. news as year, the big we enter the last trading day of
august. , that is theck biggest monthly drop since may 2012. that is the biggest drop in three years. emerging markets are the biggest since 2012. it's all about china. intervention to prop up the market will fail. it's an 8% decline. that's what we have witnessed so far. that was the height. remember back in april, we were at record. we'll fallen 12%. everything has fallen. i think these are my favorite stats read chemical companies have lost 50 billion euros this month. oil and gas companies have lost
60 billion euros. that leads me to the price of oil. days, crude trading $.17.ll -- rose by oil is still down for the third consecutive month. will notptember produce the same volatility. manus: that's a very dangerous cause. you never know what you get in september. i am going on holiday two weeks. about theare worried levels of support. beijing.ss to our chief. they have a variety of your actions. it's the economy. it just seems to be a lack of consensus on where they want to
focus. think those are two different things, the stock market and the economy. the valuations are still very high. shares are trading of an average of 50 times earnings, that compares to 24 the s&p 500. , it's stille fall very high. what we are seeing is them wanting to intervene. we know they did last week to maintain stability ahead of the military parade that will happen later this week. the government is asking brokerages, 50 brokerages, to help contribute 100 billion to support the market. they are still very active. it's a matter if that is going to have any effect. manus: there is this discussion thisthe weekend that
appreciation is sufficient. this is unacceptable rate. i am paraphrasing the report we had a from saturday. nick: the bigger issue here is the fundamentals have not appeared to be so weak recently. we have had such a string of that data. that despite the evaluation than the spending quite a bit of their for an currency reserves. u.s. treasuries, they are in a real conundrum of. do they let the market take control or try to maintain the hand that stabilizes the economy? do they manage that position -- transition? we have not seen the leadership know that it knows where this market is going now. the jury is very much still out
on whether they will pull it off. manus: i like the way you leave it there. will they be able to pull it off? thank you very much in beijing. what do you think? has the market lost faith in china's policy response? are they just throwing petroleum on a fire russian mark has the market lost faith in china's is policy responses? francine is out today. she will be back tomorrow. industrial reduction is expected to be bad in july. they got a 0.6% job. -- drop.hat does this is this the china affect? is it too early to call that
impact? when you look at the ip numbers, this is about week industrial act 70. this is coming before the china had. the market has been wobbly of late. the kind of crisis you have seen in the last two weeks had not raised its head yet. we think the japanese data will look uglier in the next couple of orders. there are a lot of questions on lifew this puts them support or in the morgue. everybody expects them to do more. china's most recent valuations put extra pressure on the government. -- the have been a great deal to welcome -- weaken the yen. we've not seen the structural reforms that are at the key to this working.
the government does have a lot of thinking to do in the weeks and months ahead. thank you very much were given us the lowdown. thank you very much. let's bring in our guest. she is the managing director. let's get to the big issue. from everyone that i have listened to over the weekend, from stanley fischer engaging with the market, we can probably remove. it's a short-term thing. we are just going to keep on going. guest: it's understandable that officials have had to take a very office approach to forecasting ahead of the fed's decision. it was never going to be an easy
function. i think there are three elements to this. one of them of course is market volatility. the second is our china's authorities losing their touch with respect to their ability to control developments? the third is the spillover effect. i think the first point, it's very important to take a cautious stance. there are contrasting factors. you've got 5 trillion worth of global equities written off since china first devalued. in oilgot a 17% spike prices. how do you combine the two? yes,nk the second thing is china's authorities are very concerned about the slowdown. it is clear from their actions.
concern --ability to control the slowdown. and thethe slowdown ability to manage a hard landing. but we have seen is a resilient growth in some of the world's largest economies. despite the fact that we have had this d bubbling of emergency markets. most parish forecast. not all is lost. if we judge the impact of the thisown in the next year, has been a reaction to the markets understanding the risks. those risks are not new. this is not been that great. the fed is great to keep the
september hike on the table. manus: every day, we wake up with a policy response. close a ipo's. about-face. probably the most lopsided interventions i've ever seen. firm it does strike a sense of separation that chinese markets are having. it's ultimately an overvalued stock arc it. everybody agrees. market is 25% of gdp. the chinese authorities look desperate. they look dysfunctional and and cohesive. to me. hand, they aree
trying to move in the right direction it three weeks ago. that has understandably caused some anxiety and caution with respect to managing the side effects. i think it's important to recognize that it makes little chinafor the economy of to have an overvalued exchange rate. this is ultimately more important for the stock market because of disinflation prices. this is in order to keep outflows from leaving the country and to try and create a someone of stability. -- semblance of stability. the problem is shadow banking and margin trading. there are twin bubbles in equity in housing.
rock they would you globe by depreciating your currency in the eye of the storm which would be fed tightening? -- this looks like complete and utter irreverence. they are linked to the table in terms of setting up an exchange rate that is good for domestic inflation or global inflation. they are a bit late. they are heading for a rocky ride in the spillover effects have been quite visible already. tightlys moved from a manage exchange rate regime to a flexible regime. expectations are in the pipeline.
where will that devaluation go to? lena: i think we are looking at another 15. we are probably looking at less than 10 now because of the fear the authorities have. manus: you are going to stay with me. this is a look at what else is on our radar. anglo merkel is calling on the european union to take a greater share of the influx of asylum seekers. germany, france, and the u.k. have asked for an emergency meeting on addressing the crisis. malaysia's prime minister is standing firm after today's of antigovernment protests. tens of thousands have called for him to resign after allegations of corruption.
he says he will not let the demonstrators destroy the country. the italian energy company says it's the largest find. we spoke to the ceo earlier. discovery is going to impact positively. that we are clearly the only company to cut a dividend. we don't need to reduce any longer. is going tory include our position and make our position in terms of cash flow much more robust than before. now continuing that team,
they have a development plan for a natural gas field in the north sea. joining us is the ceo. it's great to have you with me this owning. -- morning. you are striking in the north sea with all the rest running for the hills. it's a brave move. guest: good morning. we are happy with this good news. there is not a lot of good news in our industry. manus: you're quite right. a vote ofshow confidence in the north sea? many people had projected this was something we could no longer rely on as a substantial resource. guest: it shows a great gas discovery, the greatest in a quarter of a century.
it has been enabled by the discovery and also by the new physical allowances the government has introduced. sense.just give us a 2019?pect to produce by the candid investment you are making, this is a key plank for you. ourt: for us, it's one of flagship projects. investment is significant. for the u.k., it's going to supply 10% of gas consumption in 2020. according to our estimates, it's going to create 6000 jobs. it's important for the u.k.. comments fromsome the chancellor welcoming this investment.
sea,olicies for the north how much have they encourage you to make this investment? guest: it would not have been possible without the physical allowances that have been introduced over recent years. appreciating this. have had a significant supply. that continuity is important for exploration. tell me about exploring for new reserves and buying new reserves. how will that balance work? , we havestorically done quite a lot of exploration. in the current market, there are with attractive
assets and portfolios are it --. we are looking at the m&a markets. manus: can you help us a little bit more with that? actively looking, that's a pretty big world out there. who is under the most pressure here? is it the u.s. assets? asian assets? guest: we have an admission -- ambition to be operating in the north sea. we believe there are good opportunities in the north sea region. that is one region where we are looking for opportunities. we're also looking elsewhere. manus: we wish you well with that investment. stubbornly low inflation, wild
market volatility, that want her the federal reserve. bloombergs set down with several fed officials who refused to rule out a move in september. >> how much would you want to change the outlook based on volatility that we have seen? i think the answer to that is going to be not very much. >> we should be telling a coherent story. we're not about what happened last 10 days on wall street. we are on shaping employment. >> we should expect some volatility. what it means for monetary policy, it's not yet clear. it's a complication of something we watch. i'm not ready to say it has a long-term effect. every meeting is going to be alive option. meetings, wetween
are judging the forecast. at this point, i have not seen something that would change my own sense of how the economy is doing. >> i am in the mode now of looking at all the data. we're going to be putting in a new forecast. in looking at all the factors is the economy can sustain an increase in interest rates. both of the distances we have traveled as well as the current outlook for the economy, both of those to me would suggest that we are close. the time it is close. have lena.till he touched on this at the start of the show. -- theds as if september
market has gone from low 20% to 40%. my question is this. in the u.s., they look at inflation over five years. even, this iseak where inflation rates will be in five years time. ofwas 2.16 at the beginning august. we don't have an inflation issue. it's not on target. is it going to be that or the --. report on friday to lena: they will have to balance both. some financial stability. the fed will be cautious here as to whether the drivers behind the volatility over the last three weeks are systemic enough to cause lasting damage to the
market functioning. view,n inflation point of the dip in the five-year break even inflation swap has been quite dramatic. there only a few basis points away from the start of this year. we have a very sensitive environment respect to how policy credibility will be received if the fed or two rays in the face of this turmoil. raise in the face of this turmoil. consumerased on the retail sales data. of a is no sign whatsoever deflation mentality. the university of
michigan, those expectations have been quite steady. we have this dichotomy between global inflation pressures which by investmentsn in china and emerging markets. this is not going to dissipate. we have signs from the energy markets that oil prices are close to bottoming out. manus: i like what stanley fischer said. market forces are temporary. he also flagged the strength of the dollar. i thought this was very important. issues thatgainst we talk about a great deal, they are. to look through those. lena: what was really striking for me was the inflation rate
was up nearly one and a quarter percent on an annual basis. that suggests very it'll transition from that dollar andngth to commodity prices emerging market currency weakness. a monetary policy. central-bank policy can manage those median terms. sees: the ecb still downside risk. we talked about doing more qe and then less qe. our -- where are you on that date? lena: i would be cautious if i were a central banker. equity't want to create margin trading that sets up the
manus: welcome back to "the pulse." from bloomberg headquarters in london. here are your top headlines. china stocks have had their used to month tumble since 2008 the government intervention might fail. after the industry was told to contribute another 100 billion to a market rescue fund. that is from people close to the matter. the benchmark index is down 10%.
was down 0.6% in economists were expecting a 0.1% rise. the economy is struggling to recover from a contraction. development for a gas field in the north sea. it's expected to produce enough natural gas to be 5% of the uk's total demand. flagshipield is a project for the company. have been gambling, a few macau plungest, 26.4%. this is from one year ago. one of the officials confirmed
that by telephone reports to us. a little bit of a bump in terms of what is going on in the mac a four gambling. let's talk to jonathan ferro. it looks like another tortured day. jonathan: i want comment on that first part. dataother data, eurozone is surprising on the upside. that feeds the narrative from over the weekend. inflation in the developed world will pick up. it's that story from stanley ,ischer that feeds the idea give some life to a federal reserve meeting that looked otherwise dead. market pricing increases to 40%.
it's a key indicator for one of the reasons we love it across europe. the dax is lower. sticks hundred points finish and ugly month. this is the biggest decline in four years. greenn london, we are because that was friday's lows. some lucky people get the day off on bank holiday. the least ugly contest wins it worried i will show you why. the biggest gainer, 12% of the index in italy. stock goes higher by almost 3%. the dividendupport it going forward. out of all the oil majors, this was the first to cut the dividend. that became the victim of the oil crisis.
the biggestiday, today pop since 2009. today, they are back on trend. these are some of the key moves. london has the day off. it's a busy week ahead. ecb meeting and that jobs report on friday. manus: that could be the make or break for decision. that is jonathan ferro in london. feast for federal reserve voices we had on bloomberg. in terms of putting september in play? tom: michael mckee will join us with his perspective. the back story of what was seen in jackson hole.
the markets react and begin to set up for what is without question the event of the week. this is friday's american job reports that will affect markets worldwide. been coveringe that. money needs to be ponied up. much more than that, we get ready for friday. we will talk to michael mckee about this. skip your will join us. he is from houston. inwill talk to him about oil america and saudi arabia. manus: that is probably the single biggest issue in terms of the oil. a lot of deals are being done this morning. we will tune in at the top of the art.
tom keene is coming home from jackson hole. fieldis a supergiant gas off the coast. it is the largest ever such find in the mediterranean. it may hold 30 trillion cubic hit of gas. 5.5 billion oils of barrel -- girls of oil. -- barrels of oil. forony, what does this mean them in terms of their overall production? anthony: good afternoon. this will shore up the reserves for them. they need to replace the oil and gas they produce. in terms of production, we will have to see when they do get this field online and producing. how much they will get out of it on a daily basis.
they have estimated what's in the discovery now. we will see over the next four years what can he come out of it. they will be looking to fill a lot of the natural gas demand in egypt. there is a huge demand. they have switched to being an importer just to meet electricity demand. we will be looking to fill a lot of that demand. we will have some fuel left over. them a bit of the upside. they are going to try to fast-track the development. they are relatively confident they can get it online weekly. upside it looks like the to them. manus: some context around this
egypt. this is an important find. anthony: they have gone from an exporter to an importer. they are relying on it shipments of refined alex but are supplied i persian gulf countries. as the have gone through ,evolution and economic issues the energy peace has been a critical part of the story. it will be critical for them to ensure that the population has enough power, that the industry can grow in order for egypt to get back on much stronger footing. this is going to be a big part of the story for egypt going forward. to payll allow them companies that are producing energy. it will give them more born exchange. manus: thank you very much.
we will bring you some raking news. big globals a steelmaker. ensuring thesed on sustainability of their operations. on the closureks of one of their melt shops. they are talking about plant closures in south africa. it may affect 400 direct employees. this is probably the last thing the government of south africa needs to deal with you there is so much pressure with the mining industry. this is another blow. we will review the operation in south africa. is trading at 693 at the moment.
minorsthese metals and are taking their cue from china. the stock is down 3.7% at the moment. dollar mediaon company. it gets almost all of its value from one single chinese investment. this is africa's largest company. they launched a competitor to netflix. we haven't interview with the ceo. and china is plans not a concern. : there has been a lot of volatility. importanta number of considerations. the volatility his mainly occurred in the stock market. at the size of the
stock market in china versus the overall economy, it's relatively small. the stockf how large market is in the united states. the volatility in the stock market on the real economy is probably substantially overblown a. china is apening in transition from a much more investment led growth to a more consumer led growth. it's a consumer business. time,d think over fluctuations set aside will benefit from a more consumer led growth model. china used to grow at 10%. it has been growing at 7%. it might come a little bit down. it's still one of the fastest-growing markets in the
world. we think it's the most exciting and largest internet market in the world. invested in an exceptionally strong team. i would say our exposure to something we are excited about rather than worried about. there is volatility in the chinese stock market. we believe that the underlying fundamental is very solid. we don't spend our time worrying about short-term. that is one of the strengths of the company. we look a few years out. future and i'm very comfortable with what you're doing. if you look at global internet and the size of china and its growth, the investment we have is appropriate. what it will take to make a step
that holding would require a tremendous amount of capital. i think we are comfortable with where we are. we take a long-term view. i think it's going to be something that will be very good for our testers. manus: you can go to bloomberg.com and find out a little bit more about that. that is a very interesting story. sometimes companies that you haven't heard of, we bring them to your attention. we are going to talk about something, luxury is coming up. what is the fallout from china? the damage to be serious. just how serious? ♪
manus: the chinese economy has been a concern for the luxury sector area --. luxury brands could be for in some serious trouble. the founder of faberge. thank you for joining us. just how serious is this for the luxury brands? some people have more exposure to the chinese market than others. i think about armani. the three worst case scenario.
guest: the worst case is the exposure to chinese consumers is much bigger than they probably report. a brand that may have 300 stores in china may have sales depending on chinese clients buying overseas through agencies set up to do that for them. it's possible that exposure to china might be as much as 80% of global sales. the worst case scenario could be quite dyer if there is a massive slowdown in china. brandsis that from the you talk to? what is the real pulse of the brands you talk to in terms of the slowdown? don't think it's something that comes as a surprise. all of the brands have been
there before. we had a japanese public purse -- burst in the early 1990's. they have already been through this. i don't think there is panic. luxury is not going to disappear from china unless there is another common is revolution wipes out the market. consumption will stay there, it will maybe slowdown. that will mean some readjustment for some brands in terms of their network and their outlook on global sales and growth for the coming decade. manus: one of the big trends has been chinese traveling to hong kong. , the look at that trend mainland chinese visitors doubled to japan through the end of july. that was a huge currency move.
the yen fell by 22%. that has reversed over the past two months. talk about that risk and reward in terms of the chinese tourists. there has always been a status from the mainland chinese to go to tokyo, even though it was more expensive for what a while. the currency advantage has become a mainstream thing to do. the japanese have invented a word for it. this has never happened before. it was usually the japanese going to i. to tokyo asia coming to buy. withu look at some brands that'ssales in china, the effect.
tonese clients go back buying in the mainland or maybe hong kong. the sales in japan would decrease. it will balance out. the brands are looking at how much sales globally are made to china. there will be an adjustment. most of them will be able to sit it out. in terms of hard luxury or soft luxury, what is the biggest risk going forward? guest: the biggest risk is harder luxury. this is a less frequent purchase. wealthyy feel good clients may not have lost their mood is affected very much by how good or bad
it's doing. more onl have impact the harder luxury. it's easier to delay. more at luxury is fashion cycle. you still need to look good to your peers. hard luxury, the only product line that should not be affected are wedding rings. this is always a stable market. manus: thank you for the update. he is joining us from new york. red thise on the holiday monday. the market is considering what happens next in china. ♪
>> it's home to creation and concept, the catwalk is taking designed to a new level. the red dress modeled here was -- stitched, it and thegned digitally thread was that into a 3-d printer. outcomes plastic fashion. us be able to wear this kind of stuff. it's not just for celebrities anymore. it's not made out of hard plastic. it's very flexible. you can watch it in the dishwasher. >> the process is expensive. this jacket cost $2000. it took 2000 hours of printing time. become moregy will accessible. it's now available to anyone.
in a few years, it will be much more reasonable. they design it directly to customers. anyone with a device can print exclusive faction -- fashion home. various russian presidents, they do much more substantial things. take a look at this. they have an early morning workout. i can't do these chin-ups. got them working out at the gym. this is at his official residence. this reminds me of jonathan ferro and myself in the morning.
struggles to find a bid. and warren buffett gets his kicks. buying fuel at 66. this is "bloomberg surveillance ," live from our world headquarters this monday, august 31. i'm tom keene. vonnie quinn. mr. buffett going downstream over the weekend. vonnie: is this a value play or an energy play? tom: i'll be honest, i almost lost track of phillips 66. it will be interesting to talk about. vonnie: as summer driving season comes to a close. right now on this monday, let's get straight to our top headlines. here's vonnie quinn. vonnie: stocks headed for the worst month in more than three years. msci global index down more than 6% in august, and chinese stocks continue the largest two-month selloffsi